Chancellor gives Landlords a Break in Autumn Budget

While yesterday’s Autumn Budget certainly focused on the housing market, the Chancellor gave landlords a break (for once), by not piling further tax changes on the buy-to-let sector.

For a full breakdown of all of the Autumn Budget announcements regarding property, head over to our sister site Landlord News, where you can also hear the industry’s reaction to yesterday’s statement.

Tim Walford-Fitzgerald, a private client tax partner at chartered accountant HW Fisher & Company, is pleased that the Chancellor didn’t come down too harshly on property investors: “Buy-to-let landlords could be forgiven for pinching themselves. For once, they’ve not been the whipping boys of a Budget. After years of being portrayed as the villains of the property market, they’ve escaped further unwanted attention from a Chancellor who has instead chosen to focus on the housing market’s fundamentals, rather than seeking scapegoats.

Chancellor gives Landlords a Break in Autumn Budget

“Such a huge stimulus for the property market – both the immediate cut in Stamp Duty and the long-term largesse for housebuilders – should inject some life into a market that has been weighed down by weakening sentiment and falling real wages. But the trickle up theory, that firing up first time buyers is the key to lifting the market as a whole, is far from infallible – and the OBR’s [Office for Budget Responsibility’s] increasingly doom-laden economic outlook could reduce its impact.

“If people’s real wages are falling and property prices remain out of reach, the prospect of saving a few thousand pounds on Stamp Duty will do little to help would-be buyers save enough for a deposit.

“At the other end of the market, the move to give councils the power to levy a 100% Council Tax surcharge on empty properties risks being a triumph of symbolism over substance.

“For wealthy buyers who snap up UK property just to hold as a rapidly appreciating investment, the measure is likely to be an annoyance that will come off the bottom line, rather than persuade them to let properties they see primarily as an asset rather than a home.

“There is one shot across the bows for overseas investors though. The CGT [Capital Gains Tax] avoidance technique of using a company that holds UK property instead of selling the property itself looks set to be shut down from April 2019, with UK advisers being asked to help police the new regime.”

However, the Executive Director of the Intermediary Mortgage Lenders Association (IMLA), Peter Williams, believes that yesterday’s Autumn Budget announcements will do little to solve the housing crisis: “A solution to the housing crisis was widely expected to be the main event in the Chancellor’s Budget, yet the measures announced lacked the scale of ambition to really solve our housing problems.

“The political resolution to improve prospects for aspiring homeowners that has seen Stamp Duty abolished for the majority of first time buyers will be welcomed by many, but, in practice, it may simply inflate house prices even further. The reasons for this are twofold; firstly, sellers are likely to take advantage of the buyer’s newfound purchasing power and seek to capture higher prices than they might otherwise achieve. Secondly, as we know from previous changes, we will see some price distortion among properties around the £300,000 threshold (£500,000 in London), where demand will be at its highest.

“Ultimately, there is a real risk that we will see a stoking up on the demand side at a time when there is already a severe imbalance in supply. The Government is working hard to boost supply and is making progress. We note that the 300,000 more homes promise has now slipped out to the mid-2020s, and that it is for net additions rather than newly built homes.

“It is encouraging to see recognition of the need for a diversity of supply, including local authorities, and to see more focus on land holdings and garden towns. It was also a relief to see no more punitive taxation for landlords, though we note the planned consultation on longer-term tenancies.

“Summing up, an underwhelming sense of déjà vu remains. In every Budget, new housebuilding pledges are made, yet supply remains too low and prices unobtainable. When it comes to the success of the housing aspects of Hammond’s latest Budget, the devil will be in the detail and in moving forward at speed. The clock is ticking ever louder.”